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Sunday, 17 September 2017

Whether dispute against non-parties to arbitration agreement can be referred to arbitration?

As per the Deed of Partnership dated 1.4.2010, the applicants and the non-applicant Nos. 1 and 2 agreed to refer any dispute amongst the partners with regard to interpretation of the said deed or any other matter connected with the business of partnership to the sole arbitrator. In this context, if the plaint is perused, it can be seen that it is the case of the plaintiffs that defendant Nos. 2 to 6 by acting inappropriately had deleted the names of the plaintiffs from the revenue record pertaining to the suit property and had thereafter with the aid of defendant No. 10, had sold the suit properties to defendant Nos. 7 to 9. The relief sought was cancellation of these sale deeds executed in favour of defendant Nos. 7 to 9 dated 16.3.2016. Defendants No. 7 to 10 are not partners of the partnership firm nor are they signatories to any agreement by which any dispute amongst them could be referred for arbitration. The relief sought with regard to the cancellation of sale deeds executed in favour of defendant Nos. 7 to 9 who were strangers to the Deed of Partnership was thus non-arbitrable.

9. For the purposes of applicability of Section 8 of the said Act, it is well-settled that such agreement containing the arbitration clause should be between parties to the dispute and that such agreement should relate to or be applicable to the dispute - Yogi Agrawal (supra). Similarly, the words "a matter" appearing in Section 8 of the said Act would mean the entire subject-matter of the suit which should be the subject of arbitration. The suit cannot be bifurcated into two parts so as to refer some part to the arbitrator for adjudication and the other part to be decided by the civil court" - Sukanya Holdings (P) Ltd. (supra).

10. In the light of aforesaid law, on considering the plaint as a whole along with clause 15 of the Deed of Partnership dated 1.4.2010, I do not find that the trial Court committed any error when it rejected the application moved by the defendant Nos. 1 to 6 under Section 8 of the said Act. Considering the reliefs sought in the plaint, the ratio of the decisions in the case of Hindustan Petroleum Corpn. Ltd. and Ravi Prakash Goel (supra) cannot be made applicable to the case in hand. Though in Agri Gold Exims Ltd. (supra), it has been held that the expression "any dispute" in Section 8 of the said Act are of wide amplitude, it cannot be construed in such a matter so as to cover a dispute even against non-parties to the arbitration agreement.IN THE HIGH COURT OF BOMBAY (NAGPUR BENCH)

Civil Revision Application No. 99 of 2016

Decided On: 16.02.2017

Ramdeobaba Padmavati Developers & Builders and Ors. Vs.

Ganesh Vitthaldas Chandak and Ors.

Hon'ble Judges/Coram:

A.S. Chandurkar, J.

Citation: 2017(5) MHLJ 357

1. As the parties have been served with notice for final disposal of the Civil Revision Application, their learned counsel have been heard at length.

2. The applicants who are the original defendant Nos. 1 to 6 in Special Civil Suit No. 835 of 2015, are aggrieved by the order dated 6.12.2016 passed below Exhibit 18 whereby the application filed by them under Section 8 of the Arbitration and Conciliation Act, 1996 (for short, the "said Act") has been rejected.

3. Brief facts giving rise to the present proceedings are that it is the case of the non-applicant Nos. 1 and 2 that they along with the present applicants had formed a Partnership Firm by executing a registered Deed on 1.4.2010. The business of said partnership was to deal with real estate properties. According to the original plaintiffs, the Firm had undertaken a project of construction by purchasing land admeasuring 2.00 hectares. It is the further case of the plaintiffs that defendant Nos. 1 to 6 got the names of the plaintiffs deleted from the revenue record and thereafter in connivance with defendant No. 10, executed sale deed of the aforesaid property in favour of defendants No. 7 to 9. On that basis, the plaintiffs filed aforesaid suit seeking declaration that sale deeds executed by defendants No. 2 to 6 in favour of defendant Nos. 7 to 9 with the consent of defendant No. 10 dated 16.3.2016 were illegal and not binding on them. The possession of the plaintiffs' share of the suit property was also sought by seeking partition. There were other reliefs sought with regard to the partnership firm.

4. Defendant Nos. 1 to 6 in the aforesaid suit filed an application below Exhibit 18 stating therein that in the Partnership Deed dated 1.4.2010, it had been agreed to resolve the dispute between the partners through the medium of an arbitrator. It was, therefore, prayed that the suit be dismissed and the parties be referred for arbitration. This application was opposed by the plaintiffs and by the impugned order, the trial Court rejected the said application. Being aggrieved, defendant Nos. 1 to 6 have filed the present Civil Revision Application.

5. Shri S.P. Kshirsagar, learned counsel for the applicants submitted that in view of clause 15 of the Partnership Deed dated 1.4.2010, any dispute amongst the partners and connected with the business of the partnership, was required to be referred to an arbitrator. He submitted that as the suit was filed with regard to the property of the partnership firm and as it was the case of the plaintiffs that they had been deprived of their right as partners, the Civil Court ceased to have jurisdiction and the parties ought to have been referred to the arbitrator. He referred to the pleadings in the plaint and submitted that the cause of action for filing the suit was with regard to the act of other partners being contrary to the Partnership Deed and, therefore, the entire dispute was arbitrable. According to him, the trial Court was not justified in rejecting the said application by relying upon the decision in Suknya Holdings (P) Ltd. v. Jayesh H. Pandya & anr. reported in MANU/SC/0310/2003 : (2003) 5 SCC 531 as ratio of said judgment was inapplicable. He, therefore, submitted that the impugned order was liable to be set aside and the dispute ought to be referred for arbitration. In support of his submission, learned counsel placed reliance on the following decisions :

6. Shri J.M. Gandhi, learned counsel for non-applicant Nos. 1 and 2 supported the impugned order. According to him, defendant Nos. 7 to 10 were neither partners nor parties to any agreement by which the dispute as raised in the suit could be referred for arbitration. He submitted that clause 15 of the Deed of Partnership did not cover the reliefs sought by the plaintiffs and that the suit was filed for non-arbitrable disputes. According to him, substantial relief sought by the plaintiff was beyond the scope of arbitration He then submitted that the plaint would have to be read as a whole and on such reading, it was clear that the trial Court rightly rejected the application moved by the applicants. He relied upon the following decisions while supporting the impugned order:

7. After giving due consideration to the respective submissions of learned counsel and after perusing the documents placed on record, I am of the view that the trial Court was justified in rejecting the application moved by the applicants under Section 8 of the said Act.

8. As per the Deed of Partnership dated 1.4.2010, the applicants and the non-applicant Nos. 1 and 2 agreed to refer any dispute amongst the partners with regard to interpretation of the said deed or any other matter connected with the business of partnership to the sole arbitrator. In this context, if the plaint is perused, it can be seen that it is the case of the plaintiffs that defendant Nos. 2 to 6 by acting inappropriately had deleted the names of the plaintiffs from the revenue record pertaining to the suit property and had thereafter with the aid of defendant No. 10, had sold the suit properties to defendant Nos. 7 to 9. The relief sought was cancellation of these sale deeds executed in favour of defendant Nos. 7 to 9 dated 16.3.2016. Defendants No. 7 to 10 are not partners of the partnership firm nor are they signatories to any agreement by which any dispute amongst them could be referred for arbitration. The relief sought with regard to the cancellation of sale deeds executed in favour of defendant Nos. 7 to 9 who were strangers to the Deed of Partnership was thus non-arbitrable.

9. For the purposes of applicability of Section 8 of the said Act, it is well-settled that such agreement containing the arbitration clause should be between parties to the dispute and that such agreement should relate to or be applicable to the dispute - Yogi Agrawal (supra). Similarly, the words "a matter" appearing in Section 8 of the said Act would mean the entire subject-matter of the suit which should be the subject of arbitration. The suit cannot be bifurcated into two parts so as to refer some part to the arbitrator for adjudication and the other part to be decided by the civil court" - Sukanya Holdings (P) Ltd. (supra).

10. In the light of aforesaid law, on considering the plaint as a whole along with clause 15 of the Deed of Partnership dated 1.4.2010, I do not find that the trial Court committed any error when it rejected the application moved by the defendant Nos. 1 to 6 under Section 8 of the said Act. Considering the reliefs sought in the plaint, the ratio of the decisions in the case of Hindustan Petroleum Corpn. Ltd. and Ravi Prakash Goel (supra) cannot be made applicable to the case in hand. Though in Agri Gold Exims Ltd. (supra), it has been held that the expression "any dispute" in Section 8 of the said Act are of wide amplitude, it cannot be construed in such a matter so as to cover a dispute even against non-parties to the arbitration agreement. Said decision also does not assist the case of the applicants.

11. It is, therefore, held that the trial Court by rejecting the application moved by defendant Nos. 1 to 6 under Section 8 of the said Act, did not act with material irregularity warranting interference under Section 115 of the Code of Civil Procedure, 1908. Since there is no merit in the Civil Revision Application, the same stands dismissed with no order as to costs.